Return quickly!
On January 25, the A-share market came out of a strong market that had not been seen for a long time: the Shanghai Index rose 3.03% to recover 2900 points, the Shenzhen Composite Index rose 2%, the GEM Index rose 1.45%, and the Beijing Stock Exchange 50 Index rose 0.61%. More than 4800 stocks in the market were in the red, and more than 100 stocks were in the up limit. The net purchase of funds from the north was 6.3 billion yuan, and the turnover was nearly 900 billion yuan, sweeping away the previous decline and directly showing the trend of short selling, The investors, who had been exhausted for a long time, seemed to see hope again.
At the plate level, nothing is more dazzling than the "Chinese character" of central enterprises and state-owned enterprises. Wind China Shipbuilding Index rose as high as 7.71%, and the Chinese SOE Index also rose 6.82%, which is undoubtedly the core force to boost the overall market's strong surge throughout the day. More than half of the more than 100 trading stocks are related to the "Chinese character" or "state-owned enterprise reform", such as China Unicom, COFCO Capital, China Publishing, Sinosteel International, CYTS, etc. Even China Petroleum, with a market value of one trillion yuan, rarely goes up and down, which shows its arrogance.
Why is "Chinese" leading the market?
On the news side, at the press conference held by the top management on January 24, the head of the relevant department introduced that, "We will further study and incorporate market value management into the performance assessment of the heads of central enterprises, guide the heads of central enterprises to pay more attention to the market performance of the listed companies they hold, transfer confidence and stabilize expectations in a timely manner through the application of market-based shareholding increase, repurchase and other means, increase cash dividends, and better return investors."
Affected by this, the "Chinese prefix" changed collectively that day, leading the market out of the extreme deep V, and the next day further continued the strong theme. It is worth mentioning that the market value and weight of the state-owned sector of central enterprises are not small, and it is inevitable that there will be strong large funds to participate in the collective bargain hunting, which is enough to highlight the recognition of large funds for the investment value of the state-owned sector of central enterprises, which also makes the market have higher expectations for it.
Of course, there are some deeper logic in it. Let's discuss it.
Fundamentally, the central enterprises and state-owned enterprises can be regarded as the pillars of the national economic system, and are in a dominant position in key areas and sectors. Among more than 5000 A-share listed companies, the number of state-owned enterprises accounts for about 27%, and the market value is generally large, mainly distributed in coal, petrochemical, power, transportation, steel, communications, military, real estate, banks and other sectors, which can be called the ballast of economic and social development.
Although for a long time before, many central and state-owned enterprises have been controversial due to relatively low operating efficiency, weak sense of market competition and other factors, the senior management has been sparing no effort to promote the reform of central and state-owned enterprises for many years, and has made important strategic deployment for the reform of state-owned enterprises for many times, and has achieved fruitful results. At the end of 2022, after the "three-year action of state-owned enterprise reform", the reform actions of major central enterprises and state-owned enterprises, such as mixed ownership reform, introduction of equity incentive plans, asset restructuring and injection into the listing platform, were rapidly promoted, and the overall efficiency of central enterprises and state-owned enterprises from governance to operating ability to state-owned capital allocation was significantly improved. While the action achieved a perfect end, It also gives the central enterprises and state-owned enterprises a new look.
However, the pace of reform did not stop there.
Since 2023, the SASAC has repeatedly stressed at several important meetings that "we should pay more attention to the core functions of state-owned enterprises in serving the national strategy, and focus on strengthening strategic support in building a modern industrial system and promoting high-level science and technology to become self reliant", "We should focus on improving the core competitiveness, improving the return on assets of enterprises, highlighting the reform tasks of improving mechanisms, restructuring and integration", "we should aim at the functional positioning of state-owned enterprises, continue to deepen reform, and further optimize the layout of the state-owned economy", etc.
At the press conference two days ago, the leaders of relevant departments once again proposed that on the basis of "promoting central enterprises to incorporate the relevant indicators of the value realization of listed companies into the performance evaluation system of listed companies", they should also "incorporate the market value management effect into the evaluation of the responsible persons of central enterprises", which is not only the improvement of the evaluation system of central enterprises, but also an important milestone, It will help promote the listed companies controlled by central and local state-owned enterprises to be more active in market value management in the future - which will inevitably contain significant investment opportunities.
It should be noted that in recent years, the valuation level of state-owned enterprises and central enterprises has been in a low position for a long time, which is not only significantly lower than that of private enterprises and other enterprises (including public enterprises, foreign-funded enterprises, collective enterprises, etc.), but even lower than that of all A-shares. From the perspective of objective situation, the valuation of central enterprises and state-owned enterprises does have strong repair power for three reasons:
First, central enterprises and state-owned enterprises have shown strong profitability stability.
In recent years, the uncertainty of China's domestic and external environment has increased, and the operation of listed companies has been repeatedly interfered by external factors. In particular, in 2022, the downward pressure on China's economy has increased, resulting in the pressure on the stock prices of many listed companies. At this time, companies with stable profitability have obvious advantages. Data shows that since 2017, the ROE of central and local state-owned enterprises has been significantly higher and more stable than that of private enterprises, highlighting the excellent profitability and anti risk ability of central and state-owned enterprises, and playing the role of "stabilizer" and "ballast". Generally speaking, enterprises with high ROE should enjoy higher valuation, but the valuation level of state-owned enterprises and central enterprises has been lower than that of private enterprises for a long time, which indicates that the current valuation of state-owned enterprises and central enterprises does not fully reflect their value and is in an undervalued state, which needs to be repaired.
Second, changes at home and abroad have highlighted the value of state-owned enterprises.
In recent years, due to the intertwined influence of multiple factors, the instability, uncertainty and insecurity in the international situation have become increasingly prominent, various risks and challenges have accelerated to accumulate, and China's economic and social development environment is also facing complex and profound changes. At this time, it will be an important direction for China to deal with the external environment and stabilize the economic operation to enhance the ability of the economy to resist various risks by improving its "internal skills". As the mainstay of the national economy, central enterprises and state-owned enterprises are born with an important mission. They are bound to play a key role and constantly strengthen their competitiveness. From the statements made by the senior management in the past two years, we can also really feel that the central enterprises and state-owned enterprises have been given high expectations.
Third, improve the government's financial situation.
The operation of state-owned capital in China is closely related to finance. At present, the operation of state-owned capital is still an important part of the "four accounts" of finance. From a practical point of view, in the past two years, when the real estate market has been cold and the willingness to acquire land has been sluggish, local finance is facing greater pressure. In the medium and long term, the traditional land finance model is also unsustainable. At this time, it is imperative to promote the rise of the valuation of central enterprises and state-owned enterprises. According to public information, the total assets of state-owned enterprises in China's central enterprises are hundreds of trillion yuan. On this basis, promoting their valuation repair, even if it is small, can bring huge economic benefits, which is also very positive for making up for local finance.
For all these reasons, the market generally believes that central state-owned enterprises will continue to take the lead in assuming the role of "chain leader" in the modern industrial chain of large enterprises. Strengthening the market value management of central state-owned enterprises is not only conducive to promoting central state-owned enterprises to continuously strengthen their competitiveness, become bigger and stronger, and rank among the world-class enterprises, It will also help to further play the pillar role of central enterprises in the national economy, accelerate the construction of a modern industrial system, and better return investors through buybacks, dividends and other ways. With the implementation of a series of asset operation and reorganization integration in various fields and the continuous advancement of market value management, the advantageous assets in state-owned enterprises of central enterprises in China are expected to achieve further value remodeling.
To sum up, driven by the will of the country, covering a wide range of topics, the capacity of the theme plate is large enough, and the fundamentals are stable and well oriented. Central enterprises and state-owned enterprises have a real opportunity to continue to perform. In particular, after months of continuous decline in the whole market, many state-owned enterprises and state-owned enterprises have been in place, and the whole plate resonated with the market in yesterday's big rise. Historical experience tells us that when the market bottoms out, the sectors that resonate with the market are the most worthy of continuous attention. For example, New Energy at the end of April 2022 and ICT at the beginning of November 2022 are all sectors that resonate with the market on the day of bottoming out and have a wave of large-scale rising market in the future. If the A-share market has clearly bottomed out at the moment, then the resonant state-owned enterprises and central enterprises are likely to have considerable investment opportunities.
In terms of specific configuration, among many industries distributed by central enterprises and state-owned enterprises, those industries with low valuation and large ROE increase in recent years are expected to fully benefit from the reform of central enterprises and state-owned enterprises, including coal, petroleum and petrochemical, communications, building decoration, banking, military industry, etc. In addition, under the tone of "overall planning of security and development", the importance of energy security, information security, science and technology security and other areas related to national security is increasingly prominent. As the most reliable reliance of the country, the central enterprises and state-owned enterprises will continue to play a key role in the future, and the related information and innovation, power, high-end manufacturing and other sectors are also of great investment value.
[Note: The market is risky, so investment should be cautious. In any case, the information or opinions contained in this subscription number are only for exchange of views, and do not constitute investment suggestions for anyone. Except for special remarks, the research data in this paper is supported by Flush iFinD]
This article was originally written by "Xingtu Financial Research Institute" by Fu Yifu, a senior researcher of Xingtu Financial Research Institute
